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Bumpy road ahead for M-Commerce

E-commerce is moving down the alphabet. Next up is m-commerce, where a mobile phone can take on the attributes of a credit card.
Written by Meg McGinity, Contributor on

E-commerce is moving down the alphabet. Next up is m-commerce, where a mobile phone can take on the attributes of a credit card.

The new buzzword is just finding its wings, so to speak, among wireless operators and vendors, but real questions arise about the feasibility and marketability of turning your cell phone into a cash register.

While shopping with your wireless phone has become run-of-the-mill in Europe, the trend has barely begun in the U.S.

In The Planning Stages

"It's not real today, but it's in the forward-looking business plans of wireless operators," said Elliott Hamilton, senior vice president at research firm The Strategis Group. "The carriers will begin with simple advertising and joint promotions, and then offer most transactional services, like car rentals," Hamilton predicted.

Through its Wireless Web offering, Sprint PCS penned a deal with Amazon.com back in December 1999 to enable mobile book buying. And two-way wireless paging company WebLink shook hands with The Microsoft Network to bring Internet-based information to paging customers.

Russell Villemez, chief information officer at WebLink, said the company's network makes possible such transactions as buying a soda from a vending machine and getting billed on your wireless bill, or even executing a stock trade.

Still, the transition of wireless phone to wireless wallet will be a bumpy one, analysts warned. First, the process today requires a Wireless Application Protocol-enabled phone. Such phones won't significantly penetrate the market until 2001, analysts predicted. Second, the scrawny size of the phone's screen prevents "catalog" shopping or Web surfing. Because of the screen, the content from the Web must be "repurposed," Villemez said. Finally, and possibly most detrimental to m-commerce, is finding a way to bill for these services.

M-commerce isn't just about point-of-sale buying. The concept opens the thorny issue of "phone spam." While wireless operators could rake in hefty revenue from advertisers, a customer barraged with pesky messages about sales deals would likely be annoyed. Also, it is inevitably the customer that ends up paying for receiving the unsolicited messages.

"There is no way in hell a customer is going to pay for that," said Kelly Quinn, senior analyst at Aberdeen Group.

Business models are emerging that could have the wireless operator acting as the billing party for transactions and purchases made on a wireless device. "The Nordic companies like Ericsson have a theory that handsets should have a bank-card chip embedded in it, then [m-commerce] charges appear on your wireless phone bill," Quinn said. Analysts predicted that if such a model takes hold in the U.S., it will take a while, since smart-card technology hasn't caught on among Americans.

In the meantime, software companies are also working with end-device manufacturers to bundle m-commerce capabilities into a phone before the user purchases it. The phones can be packaged with airtime from a wireless operator. For instance, BarPoint.com, a company that is putting its software in Motorola phones, lets customers search for product information or comparative pricing by plugging in an item's bar code. And Smith-Gardner & Associates, a transaction software company, recently inked a deal with Hewlett-Packard and Nokia as well as retailer Nordstrom to foster shopping from a wireless phone.

So what's next? Many analysts point to location-based services as the factor that will really make m-commerce sing. When wireless operators embrace the emergency 911 mandate that forces them to pinpoint a wireless user's location, they will have the ability in their networks to offer messages tailored to a customer's geographic area.

That's when they walk headlong into another battle: user privacy.

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